IRS Seeks Input To Clarify Political Activities For 501(c)(4) Organizations

by Shannon Allen

The Internal Revenue Service (“IRS”) seeks input on proposed rules guiding “tax-exempt social welfare organizations” on “political activities related to candidates” that will not be recognized as the promotion of “social welfare.” Currently, a group that “primarily” participates in activities that “promote social welfare” can be recognized as operating “exclusively for the promotion of social welfare” (potentially qualifying for tax-exempt status), even though it participates in “some political campaign intervention.”

Specifically, section 501(c)(4) states that “[a]n organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community.” Treas. Reg. § 1.501(c)(4)-1(a)(2)(i). An organization “embraced” within section 501(c)(4) is one that is “operate[s] primarily for the purpose of bringing about civic betterments and social improvements.”Id. [Further,] “[t]he promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii).  

With this notice of proposed rulemaking (“NPRM”), both the Treasury Department and the IRS aim to provide more “definitive rules” regarding “political activities related to candidates” instead of the current “fact-intensive analysis.” This proposed amendment to Treas. Reg. § 1.501(c)(4)-1(a)(2) will “identify specific political activities” that would be recognized as “candidate-related political activities” that do not “ promote social welfare.”

The Treasury Department and the IRS seek comments from the public and from a broad range of organizations.  Generally, comments are requested on all aspects of the proposed rules.  In particular:

• whether the use of the “primarily” standard in section 501(c)(4) should be modified; 
• if the “primarily” standard is retained, whether the standard should be defined with more precision or revised to mirror the standard under the section 501(c)(3) regulations; 
• what proportion of an organization’s activities must promote social welfare for an organization to qualify under section 501(c)(4); 
• whether additional limits should be imposed on any or all activities that do not further social welfare; 
• how to measure the activities of organizations seeking to qualify as section 501(c)(4) social welfare organizations for these purposes; 
• the advisability of adopting an approach to defining political campaign intervention under section 501(c)(3) similar to the approach set forth in these regulations, either in lieu of the facts and circumstances approach reflected in Rev. Rul. 2007-41 or in addition to that approach (e.g. by creating a clearly defined presumption or safe harbor); 
• whether any modifications or exceptions would be needed in the section 501(c)(3) context and, if so, how to ensure that any such modifications or exceptions are clearly defined and administrable; 
• whether there are other specific activities that should be included in, or excepted from, the definition of candidate-related political activity for purposes of section 501(c)(4); and 
• how the proposed addition or exception is consistent with the goals of providing more definitive rules and reducing the need for fact-intensive analysis of the activity. 

Comments must be received by February 27, 2014 in one of the following ways:

1. Mail: send submissions to: CC:PA:LPD:PR (REG-134417-13), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044; 
2. Hand-delivery:  Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-134417-13), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC; or 
3. Electronically: via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-134417-13).